Zynga S-1 highlights cloud as competitive advantage

In some cases, cloud computing is merely a means to avoid investing in “undifferentiated heavy lifting,” but when done right, it actually can be a source of significant competitive advantage. So says Zynga, at least, which highlighted its unique cloud infrastructure, as well as its advanced analytics efforts, as part of its core strengths in the S-1 statement it filed this morning.

According to the form, Zynga views its “scalable technology infrastructure” as a core strength, stating, “We have created a scalable cloud-based server and network infrastructure that enables us to deliver games to millions of players simultaneously with high levels of performance and reliability.” In describing its cloud infrastructure as an important aspect of its business, Zynga’s S-1 says:

Our physical network infrastructure utilizes a mixture of our own datacenters and public cloud datacenters linked with high-speed networking. We utilize commodity hardware, and our architecture is designed for high availability and fault tolerance while accommodating the demands of social game play.

We have developed our architecture to work effectively in a flexible cloud environment that has a high degree of elasticity. For example, our automatic provisioning tools have enabled us to add up to 1,000 servers in a 24-hour period in response to game demand. We operate at a scale that routinely delivers more than one petabyte of content per day. We intend to invest in and use more of our own infrastructure going forward, which we believe will provide us with an even better cost profile and position us to further drive operating leverage.

Zynga has been touting its Z Cloud infrastructure for more than a year, which reverses the conventional approach to hybrid cloud computing. Whereas many analysts initially assumed companies would use private clouds as a gateway to public clouds, Zynga uses Amazon EC2 as a staging ground before ultimately moving games onto private cloud resources. Essentially, Amazon’s cloud lets Zynga scale elastically and determine average traffic load and other metrics, so that it can optimize its internal infrastructure for each game’s specific needs.

The goal of this strategy is efficiency: Zynga doesn’t have to invest in more resources than necessary upfront, nor does it have to worry about underprovisioning resources or otherwise inadequately configuring them when it brings games onto its private cloud. In many cases, private clouds can cost less than public clouds for applications with fairly stable usage patterns, and they help companies meet various requirements around security and compliance. Zynga uses Cloud.com for its private cloud infrastructure, as well as RightScale as a management layer that makes for a uniform experience in terms of managing both public and private resources.

As is the case with every leading web company, Zynga also highlights its big data strategy as a key differentiator. Describing its “sophisticated data analytics,” the S-1 notes, “The extensive engagement of our players provides over 15 terabytes of game data per day that we use to enhance our games by designing, testing and releasing new features on an ongoing basis. We believe that combining data analytics with creative game design enables us to create a superior player experience.”

Cloud computing and advanced analytics are double-edged swords, though. As Zynga’s S-1 acknowledges, relying on publicly hosted cloud computing resources makes it vulnerable to service outages like Amazon Web Services’ infamous April 2011 outage, which temporarily downed both FarmVille and CityVille. “If a particular game is unavailable when players attempt to access it or navigation through a game is slower than they expect, players may stop playing the game and may be less likely to return to the game as often, if at all,” the form states.

Relying on advanced infrastructures and analytics also means competing with companies such as Facebook, Google and others for employees skilled enough to keep Zynga’s operations on the cutting edge. Specifically, the company acknowledges, “game designers, product managers and engineers” are in high demand, making attracting and retaining them a resource-intensive process. In some cases, this has meant offering particularly attractive employees lucrative stock options, which could come back to bite the company. As it notes in the S-1, “[W]e expect that this [IPO] will create disparities in wealth among our employees, which may harm our culture and relations among employees.”